The contestability of multiple large shareholders and bank debt: evidence from ChinaPurpose This paper explores the role of multiple large shareholders to provide evidence of their influence on a firm’s bank debt.
Theoretical framework We introduce agency theory to support our study.
Design/methodology/approach Empirical research (including the FE model, PSM method, and IV method) is used in our study. Moreover, this paper selects the non-financial A-share companies listed in the Shanghai and Shenzhen stock markets from 2007 to 2022 as the sample.
Findings We find that bank debt is positively and significantly related to tunneling, and negatively and significantly related to Tobin’s Q. Moreover, it is found that multiple large shareholders’ contestability reduces firms’ bank debt. Furthermore, we document that the influence of multiple large shareholders on bank debt would be reduced in state-owned firms.
Practical & social implications of research Our findings contribute to the literature by highlighting the role of multiple large shareholders, who can reduce the agency cost of a firm’s bank debt.
Originality/value This study contributes to the literature in several important ways. First, it adds to the research on the governance role of multiple large shareholders. Second, this paper offers the first attempt to examine the impact of the contestability of multiple large shareholders on bank debt, and we find a negative relationship between them.
Keywords:
Multiple large shareholders; contestability; bank debt; China